The 2020 Mid-Year Economic Update_long

European Industrial Outlook: Growth Moderate in 2007


The European manufacturing sector, much like that of the U.S. and Japan, saw its industrial cycle peak in 2006 and will see its growth moderate in 2007, according to the Manufacturers Alliance/MAPI Industrial Outlook for Europe February 2007, a report that analyzes 27 major industries.


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In a sign of manufacturing sustainability, however, 23 of the 27 industries tracked in the report had inflation-adjusted production above the level of the previous year, indicating continued broad-based growth in the industrial sector.


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Top industry performers in 2006, recording year-over-year double-digit growth, were valves, tubes and electronic components (20 percent); machine tools (14.7 percent); optical instruments (14.3 percent); electric ...

The European manufacturing sector, much like that of the U.S. and Japan, saw its industrial cycle peak in 2006 and will see its growth moderate in 2007, according to the Manufacturers Alliance/MAPI Industrial Outlook for Europe February 2007, a report that analyzes 27 major industries.


&nbsp ;


In a sign of manufacturing sustainability, however, 23 of the 27 industries tracked in the report had inflation-adjusted production above the level of the previous year, indicating continued broad-based growth in the industrial sector.


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Top industry performers in 2006, recording year-over-year double-digit growth, were valves, tubes and electronic components (20 percent); machine tools (14.7 percent); optical instruments (14.3 percent); electric motors, generators, transformers (14.2 percent); aircraft and spacecraft (13.7 percent); and farm and forest machinery (10.8 percent).


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While the component manufacturers led European industrial growth, weakness was evident in four industries which declined, oil and gas (-7 percent); telecommunications transmitters (-5.1 percent); basic chemicals (-3.3 percent); and motor vehicles (-2 percent).


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The strength of component manufacturers points towards a healthy pipeline of orders for investment products, said Kris Bledowski, Manufacturers Alliance/MAPI economist and analysis author. It confirms that it is in a mature phase of the (economic) cycle, but one in which demand for capital goods will hold up for awhile.


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The relative weakness of those few process industries that have contracted mildly is consistent with their turning earlier in the cycle than durable goods.


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Overall, European manufacturers will do well in 2007, perhaps better than their U.S. counterparts.


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Bledowski writes that 16 industries are in the accelerating growth (recovery) phase of the business cycle; seven are in the decelerating growth (expansion) phase; two appear to be in the accelerating decline (either early recession or mid-recession) phase; and two are in the decelerating decline (late recession or very mild recession) phase of the cycle.


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Overall, only 15 percent four out of 27 of the industries examined are in a declining mode, and a rather mild one at that, he reports. This testifies to a broad-based expansion that has all the hallmarks of being sustainable for another two to three years.


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